Sept. 20 (Bloomberg) -- BlackBerry Ltd. is eliminating a
third of its staff and scaling back operations after quarterly
sales missed analysts’ estimates by half, a sign of quickening
deterioration at the already struggling smartphone maker.

The company will cut 4,500 jobs and record an inventory
writedown of as much as $960 million for the fiscal second
quarter, according to a statement today. Waterloo, Ontario-based
BlackBerry expects to report a net operating loss of as much as
$995 million for the period. Sales were about $1.6 billion,
compared with the $3.03 billion average estimate of analysts
surveyed by Bloomberg. The shares fell the most in three months.

In a concession that it has failed to gain traction against
Apple Inc.’s iPhones or Google Inc.’s Android devices,
BlackBerry is narrowing its focus to the market for corporate
and professional users. Even that decision may not be enough,
with customers such as Morgan Stanley holding off on committing
to new BlackBerry devices.

“That’s the nail in the coffin,” said Keith Lam, managing
partner with Red Sky Capital Management Ltd. in Toronto. His
firm manages C$220 million ($214 million) and is getting rid of
its BlackBerry shares because of the results. “If you’re not
selling your devices -- and that’s the thing everyone was hoping
would turn around the company -- that’s just not happening.”

2007 Levels

BlackBerry’s $1.6 billion in revenue would be its lowest
quarterly sales since mid-2007, when smartphones were a nascent
market. Back then, the iPhone had been out for less than three
months, and Google’s now-dominant Android operating system was
still in the development phase.

BlackBerry has hired accounting firm PricewaterhouseCoopers
LLP to evaluate the company for potential buyers, according to
two people with knowledge of the move.

Chief Executive Officer Thorsten Heins was counting on the
BlackBerry 10 phones -- introduced in January to good reviews --
to reverse a sales slide, return the company to profitability
and make the brand hip again. Instead, its market share
continues to slide and BlackBerry remains unprofitable. Morgan
Stanley is holding off on upgrading to the new platform,
concerned that the company won’t be around to support the
devices, people familiar with the matter said last month.

The Canadian company said it will record revenue for sales
of 3.7 million smartphones last quarter, mainly from earlier
BlackBerry 7 devices. Overall, 5.9 million smartphones were sold
through to customers in the period, including ones shipped to
carriers earlier, the company said.

Z10 Flop

The inventory writedown is mostly for Z10 touch-screen
devices, which the company had designated as its flagship model
to compete with the iPhone. The company also introduced two
devices this year with physical keyboard, the Q10 and Q5.

The adjusted second-quarter net loss will be as much as
$265 million, or 51 cents a share, BlackBerry said. That
compared with the average analyst estimate of 16 cents.

BlackBerry had 12,700 workers as of the end of March, the
last time it disclosed a number.

“It is always a cause for concern for our government”
when a company like BlackBerry fires workers,’’ Canadian
Industry Minister James Moore said in an e-mailed statement.
“Our thoughts are with those who have lost their jobs.”

BlackBerry is the biggest spender on research and
development among publicly traded Canadian companies, according
to data compiled by Bloomberg, making its employee base
important for the nation’s economy.

‘Knock-On Effects’

“Even if they aren’t all in Canada, the knock-on effects
could be significant over the coming months,” said Terrence
Connelly, principal at hedge fund Contingent Macro Advisors LLC
in Lafayette, California.

The writedown extends a streak of inventory charges, which
were previously spurred in part by the ill-fated PlayBook
tablet. The company took a pretax expense of $485 million in
December 2011, a second charge of $267 million the following
March and a third writedown of $335 million in June 2012.

Still, BlackBerry continues to introduce new products. In
addition to the Q10, Z10 and Q5 released so far this year,
BlackBerry this week introduced the Z30, a model with the
company’s largest screen yet. It goes on sale in the U.K. and
Middle East starting next week.

Accountants, Lawyers

A team of accountants and lawyers from New York-based
PricewaterhouseCoopers have been working at BlackBerry since
August, said the people, who asked not to be identified because
the contract hasn’t been made public.

It previously hired Perella Weinberg Partners LP as an
adviser -- alongside its bankers at JPMorgan Chase & Co. -- to
help explore its options, a person familiar with the decision
said earlier this month.

While Fairfax Financial Holdings Ltd., BlackBerry’s largest
shareholder, has talked to Canadian pension fund managers to
build support for a takeover deal, according to a person with
knowledge of the discussions earlier this month, investors have
speculated that a homegrown bid for the company faces long odds.
BlackBerry took steps this month to lobby the Canadian
government over foreign-takeover issues.

“It appears the only option BlackBerry has is to
ultimately sell itself,” said Neeraj Monga, an analyst at
Veritas Investment Research Corp. in Toronto. “But it seems
nobody’s stepping up to the plate.”